Living beyond your means is one way to cost yourself a lot of money. Picture: Thinkstock Source: News Limited

DAILY household expenses and bills are not what's killing our finances, write David and Libby Koch.

"Cost of living pressures" has become a common catchcry of the election campaign from both sides of politics. While gas, electricity and childcare costs have risen steeply, there are other costs that have fallen and the consumer price index is historically low.

In the past year, the cost of food has risen just 1.1 per cent, petrol is down 3 per cent but wages are up 3.1 per cent.

It makes us wonder whether "cost of lifestyle pressures" are just as damaging to the household budget and accentuating the overall financial pressure.

The way we spend money, and what we spend it on, has changed quite dramatically over the generations.

While energy and childcare costs have risen, car prices are at their most affordable since the 1970s, as are airline tickets. Costs of electronic items such as TVs, sound systems and gadgets have never been cheaper.

But look at what you spend your money on now and compare it with years ago. That's where the financial pressure is coming from.

Telecommunication costs are a lot higher, with increased usage and data downloads from smartphones, tablets and high-speed internet.

Are you amazed at the number of cafes popping up in building foyers and street corners? That's because we don't use the instant coffee in the staff kitchen anymore.

While general retail sales have been flat for a couple of years, one of the few growth areas has been takeaway food as we buy more family meals per week rather than cook our own meals.

Then there are trends such as destination weddings, record overseas travel and vanity health procedures.

Maybe the financial pressure we're experiencing is coming from maintaining unrealistic lifestyle expectations, rather than the increasing costs from the essentials of life.

An AMP/National Centre For Social and Economic Modelling study found the average Aussie family is $224 a week better off than in 1984, and low-income households are $93 a week better off.

Maybe we can all ease the financial pressures by taking a good hard look at our lifestyle choices, what we really need to spend money on, and whether we can get better bang for our buck. Remember it's the little, regular savings that can add up to a big amount.

* Forget bottled water. We whinge about paying $1.50 a litre for petrol but are happy to pay $2.50 for 350ml of water that we can drink for free from the tap. At $2.50 a day, that's $17.50 a week or $910 a year.

* Take a Thermos of your favourite coffee to work or drink the instant coffee that the boss provides. Two takeaway coffees a day at $3.50 each is $7 a day or $1820 a year.

* Make and take your own lunch to work, saving $6 a day or $1560 a year.

* The average Australian family spends $161 a week on recreation. That's a lot of money when there are so many free recreational options. Cut that back to $100 a week and as a result save $3172 a year.

Just these four small lifestyle adjustments have saved a total of $7462 a year in after-tax dollars. With the median wage about $55,000, that saving can have a significant impact.

They are simple easily quantifiable lifestyle changes, but there are plenty of others where the savings depend on your current lifestyle decisions.

* The average Australian spends $32 a week each on outsourced meals rather than cooking themselves. We have a mate who eats out every day and spends on average $55 across 3 meals … that's $20,020 a year.

* Have the confidence to negotiate every purchase to get the lowest price. The average family spends $10,530 a year on household furnishings and equipment. Imagine if you could save 10 per cent off the purchase price and save over $1000.

* The average running cost a medium sedan is $10,000-12,000 a year. Is that second car worth the convenience? At least do the maths on using a blend of public transport and taxis where appropriate.

* Brand name clothing can cost the earth and low-price retailers such as Target, Kmart and Big W offer good value alternatives. You can also save a fortune if you buy home brand groceries and generic medicines. They usually have the same ingredients, work in the same way and are cheaper.

* Gym memberships start from $25 a week. Instead, go running or swimming a few times a week or meet up and exercise with friends on set days.

MONEY-WASTING QUESTIONS

* Does my car really need premium petrol?

* Am I paying for internet services I don't use?

* Are extended warranties really worth it?

* Why am I not doing a shopping list to stop impulse buying?

* Will I compare alternatives when I shop online?

FORGOTTEN DEDUCTIONS

Tax time is in full swing, so be sure you're not footing the taxman's bill this year.

Here are a few of the more surprising deductions that are sometimes forgotten.

> Health expenses

If you have paid more than $2120 in medical bills this year, you can claim 20 per cent of any amount above that as a deductible expense. That threshold refers to net medical expenses, which means your total medical expenses minus Medicare and private health rebates.

> Rental properties

Expenses such as bank charges, loan interest, body corporate fees, lease preparation, repairs and maintenance costs can all be claimed as a tax deduction. Of course, there are conditions around making deductions, such as the property must be genuinely available for rent.

> Income protection

Unlike most other insurance, your income protection insurance premiums are tax deductible, so make sure you're claiming them. However, they can only be claimed if paid outside a super fund. Remember that even though income protection premiums are tax-deductible, any benefit payments are assessed just like your regular income so be sure to report them.

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